Analysts remain cautious about Catcher profitability

UNCERTAINTY:Deutsche Bank maintained its ‘hold’ rating for Catcher’s shares, forecasting that earnings doubts would remain in the second half of the year

By Helen Ku / Staff reporter

Uncertainty over the degree to which metal casings will be used by makers of ultra-light notebooks has led analysts to remain cautious about Catcher Technology Co’s (可成科技) profitability this year, despite the company forecasting that strong demand for casings used in smartphones and tablets would drive annual sales to a record high this year.

William Yang (楊維倫), an analyst at Deutsche Bank in Taipei, said in a note dated Monday that although Catcher revealed better-than-expected fourth-quarter earnings on Friday last week, the company might meet hurdles this year while achieving growth in annual sales.

Deutsche Bank maintained its “hold” rating for Catcher’s shares because it forecast that earnings uncertainties would remain in the second half of the year.

Difficulties facing Catcher include competition from other materials, such as carbon fiber, used in notebook casings and plastics used in smartphones casings, as well as its competitors’ improving capabilities. Casetek Holdings Ltd (鎧勝控股) is seen as Catcher’s biggest rival in the casings market.

Meanwhile, HSBC Securities Taiwan analyst Carrie Liu said in a recent note that HSBC also remained cautious about Catcher’s long-term profitability and growth momentum.

Despite Catcher telling investors during a conference call last week that it aimed to decrease the ratio of casings used in notebooks and non-notebooks to 40 percent to 60 percent, from 45 percent to 55 percent last year, Catcher might not be able to benefit significantly from notebook brands’ adoption of metal casings for their ultra-light notebooks, Liu said in the note.

Liu said that orders of Apple Inc’s iPad Mini may boost in-house supply by an electronic manufacturing service provider, namely Casetek, and that Catcher might face uncertainties over end-product sell-through this year.

Liu forecast that Catcher’s earnings would grow by 3 percent this year, from NT$10.89 billion (US$364.03 million) last year, due to mainly better-than-expected margins and a lower tax rate.

In the near term, Liu forecast that Catcher would see its first-quarter sales drop 7 percent quarter-on-quarter from NT$9.91 billion last quarter due to seasonal factors, followed by 14 percent quarter-on-quarter growth in sales this quarter.

In line with Catcher’s estimate of a between 5 percent and 10 percent quarter-on-quarter decline in first-quarter sales, Deutsche Bank forecast that company sales last quarter would decline by 6 percent.

For the whole year, Catcher’s sales are expected to grow 14 percent annually from NT$37.03 billion last year, with a gross margin of 42.9 percent and operating margin of 33.2 percent, Deutsche Bank said.